The primary desire of family business advisors, like myself, is to see family-owned businesses live on for many generations. But some family businesses are beyond saving and want to die peacefully.

Those businesses need hospice.

Hospice is a service and philosophy of care for terminally ill patients. Hospice has four primary goals:

1. Relieve the pain and suffering of the terminally ill;
2. Make possible a “good” death;
3. Help the family; and,
4. Assist in the search for meaning.

While best known for helping a terminally ill person and their family, there’s a growing need to extend hospice to terminal family-owned businesses.

Terminal family businesses can be characterized as having one or more of the following situations:

• The next generation has no interest in continuing the family business. Less than 40% of first to second generation hand-offs are successful. Less than 15% of second to third generation hand-offs survive.
• The siblings of the next generation dislike one another, don’t talk to one another, don’t trust one another, refuse to work together, and/or refuse to define a unity strategy. I recommend Doug Box’s new book Texas Patriarch for an actual, first-hand account of what happens in a wealthy family that can’t get along with one another.
• The business has outdated products and processes, serving a declining market and customer base, with little or no hope of change or improving. I’m not just talking about buggy whips. I’m talking about examples such as Uber grabbing the taxi market.
• The family lacks the will, ability or initiative to turn around their bleedingbusiness and seek to sell the body to someone. Most family business owners have over 75% of their retirement money tied up in the business. They need a way to cash-out.

A hospice story

Certified family business advisors are trained and equipped to provide hospice-type services. Lisë Stewart, founder and president of Galliard Family Advisor Institute, recently shared a hospice-type story.

A third generation family member asked Lisë to go with him to meet with his grandfather and father. She asked “Why?” He replied, “I need your support when I tell them that I have no interest or intention of joining the family business.” That’s an example of family business hospice care.

Is your family business in need of hospice? I’m ready, willing and able.

Columbus never achieved his goal but we celebrate the outcome of his failure.

Columbus was obsessed with finding a westward route to Asia from Spain. Finding it would enrich not only his Spanish patrons, primarily Queen Isabella, but himself as well.

Columbus attempted and failed four times to find a westward route to Asia. On his first voyage in 1492 he failed to find a route to Asia but found North America. His second and third voyages were likewise failures but nonetheless led to his discovery of South America.

And on his fourth and final voyage in 1502 he crashed on a Central America beach. The site where Columbus ended his sailing career is where centuries later mankind would dig the Panama Canal providing ships the westward route to Asia Columbus set out to find.

Columbus failed to sail westward to Asia but succeeded in discovering North, South and Central America.

Like Columbus, I experienced an unexpected benefit from a failure.

As a controller at Motorola, I set out in 1986 to discover a more accurate cost management system to support Six Sigma. I discovered Activity Based Costing (ABC) but failed to convince Motorola senior management to implement it. So I resigned from Motorola and became an entrepreneur. I started an ABC software, consulting and training company, ICMS, Inc., in 1988. And in 2016 I’m still helping companies improve their cost systems 29 years later!

Moral of the Story

When your intentions are good, the outcome is usually positive, although not always specifically what you set out to achieve.

But when your intentions are evil, bad or self-centered, none of the results are ever good.

I believe Columbus would be shocked to know that we created a national holiday to celebrate what he considered a failure.

What outcomes of failure do you celebrate personally or professionally?

It took the dentist and his assistant only 10-minutes to perform my scheduled treatment. But I spent 60-minutes in the chair staring at a computer screen.

What are the root causes for me wasting 50 minutes waiting for my treatment to be completed? To answer that question, I’ll use The 5-Whys method I was taught decades ago in Six Sigma class.

1. Why wasn’t the dentist immediately available at my appointment time? He was working on two other patients in adjoining rooms that had arrived just before me.
2. Why did my dentist have more than one patient in the office? Because switching back and forth between 3 chairs is how most dentists believe they can maximize revenue.
3. Why does the dentist need more revenue? To pay for the overhead costs of having 3 fully-equipped treatment rooms, space costs for 3 rooms plus 3 dental assistants to tell patients “The doctor will be right back“.
4. Why don’t most dentists treat one patient at a time? Because they believe treating one-patient at a time is good for the patient but not for the dentist.
5. Why don’t dentists believe treating one patient at a time is good for them? Because dentists are either unaware of lean principles, they think lean is a manufacturing practice not a medical best practice or they’re unaware of the profit and customer satisfaction benefits of one-patient-flow Lean Dentistry.

I like my dentist and his staff. But I hate their process.

“I wish there was a Waze app for navigating my business and career.“

When driving I use the Waze app on my cell phone because:

• It offers me alternative routes to my desired destination.
• It routes me around unexpected obstacles, like accidents.
• It re-routes me to my desired destination if I make a wrong turn or mistake.

Someone recently asked “Is there something like Waze for my business?”

I answered “Yes, there are three versions. Mentor, coach or business advisor.”

Instead of you looking at a screen they look you in the eyes. A mentor, coach or business advisor ask great questions. They listen. They help you decide.

Like Waze, these three business applications offer alternative routes to your desired business or career destination. And using their personal experience, skills and wisdom, a mentor, coach or business advisor guides you away from obstacles and picks you up when you’ve made a mistake.

If you or your business needs a Waze, download me at TomPryor@icms.net .

“Competitive advantage is now based on what you know rather than what you own.” Mary Adams

Have you noticed that your customers, your boss, your co-workers, your friends and your family all share something in common? They all value what you know, not what you own.

If you’re a plumber, the customer values your ability to identify the root cause of their water leak. They don’t value your new truck or tools.

If you’re a family business advisor, the customer values your questions and how they lead to answers that improve their situation. They don’t value your laptop or new website.

If you’re an employee, your boss and co-workers value you saying “I’ve seen this situation before, so here’s what I recommend we do.”

If you’re a manufacturer, your customers value your knowledge of the requirements of their business and industry, not your new ERP system or robots.

Or if you’re a church music minister, the pastor values your knowledge of the Bible and how you chose the perfect songs to support their sermon topic, not your new keyboard.

What is the “Trigger” for someone to call you? It’s what you know, not what you own.

What’s your daily nut to crack? 

That’s a question I often ask business owners.

What I’m searching for is, “How much do you need to sell today to break-even?” Fixed costs are the shell. Inside the shell are tasty profits.

Break-even is sales revenue number your business must surpass to make a profit.

Most business owners don’t know the answer to my question off the top of their head. But I help them identify the number using their business’ Profit & Loss report. After we identify the nut, business owners rarely forget it.

It may sound complicated, but it’s not. Break-even analysis lets you know how many hamburgers, stampings, books, or hours of consulting you must sell each day in order to cover your costs.

The formula for Break-even = Fixed Cost/Gross Profit.

For example, if the daily fixed cost to operate a business is $500 and the average Gross Profit percent is 25%, the daily nut to break-even is $500/.25 = $2,000 . You’ve got to sell $2,000 every day to cover fixed costs before you make a profit.

Why do I ask, “What’s your daily nut?”

• It’s a good conversation starter.
• The answer is useful.
• Helping a business owner answer the question is a simple way I can help.
• The bigger the nut, the more stress to crack it.
• Knowing your break-even is a key part of any good business plan.

Knowing your daily nut is practical wisdom. The wisdom to answer “What’s your daily nut?” with a sales number and to act rightly is distinctly practical.

If you have questions on how to define your daily nut, email TomPryor@icms.net .

Good ideas don’t always spread.

Wilt Chamberlain was a great basketball player but terrible free throw shooter. The average NBA player shoots 75%. Wilt made only 51% of his foul shots over his 14 year NBA career. The 1961-62 season, however, was different.

During the 1961-62 season someone taught Wilt how to shoot free throws underhanded. The underhanded shot (see picture above) was softer and more consistent than the traditional way of holding the ball above the waist.

Using the underhanded “Granny Shot” resulted in Wilt making 28 of 32 free throws during his record setting 100 point game March 2, 1962.

But Wilt stopped shooting free throws underhanded the following year.

The reasons why Wilt stopped shooting foul shots underhanded are the same reasons why accountants stopped using Activity-Based Costing.

Activity-Based Costing (ABC) is a best-practice method defined during the 1980’s. It’s based on a simple principle: “Activities consume costs & Products consume activities”. I was blessed to be director of the research project that gave birth to ABC.

Activity-Based Costing was successfully implemented and used by such notable companies as UPS, Federal Express, Ralston Purina, and Chrysler beginning in the 1990’s to improve decision-making and profit. Yet ABC is rarely taught in college or used by companies in 2016.

The reasons why Wilt abandoned the underhand free throw are the same root causes why Activity-Based Costing is rarely used:

• Wilt was willing to change but not transform his technique. Change is often successful but soon abandoned. Transformation is permanent. Wilt’s change to underhanded foul shots ended after one year. Rick Barry, however, transformed his foul shooting entirely to underhanded for his career, resulting in a 89% lifetime free throw average..
• Accountants were willing to try Activity-Based Costing pilot projects but not transform the company costing system. The results of ABC projects from 1990-2000 were overwhelmingly favorable. But few companies transformed their costing systems to ABC.
• Wilt was not required to shoot underhanded by leadership. Even though competition frequently fouled Wilt because of his poor free throw results, neither his coach or team owner pressed him to change. A task of leadership is to create an alignment of strengths in ways that make our weaknesses irrelevant. Shooting foul shots underhanded made Wilt’s weakness irrelevant, but his coach did not make him continue in his strength.
• Accountants were not required by the CEO, CPA or IRS to convert to Activity-Based Costing. Even though ABC pilot projects consistently demonstrated more accurate and understandable cost reporting. The majority of CEO’s moved their attention from ABC to the next hot topic promoted by consultants or trade journals.
• Wilt had a high threshold of collective behavior. He refused to change unless most every other player in the league shot underhanded. Wilt was willing to abandon a better method in exchange for conforming to the majority of players. Rick Barry had a low threshold. He was willing to be a loner if the outcome was positive. Not so with Wilt.
• Accountants have a high threshold of collective behavior. By nature, accountants are conformists. If the majority of accountants and accounting software products don’t use Activity-Based Costing, then neither will they. Marketing professionals have a low threshold. They are by nature non-conformists.

Being underhanded is bad. Shooting underhanded is good. Both in the game of basketball and the profession of cost accounting.

To learn more about Activity-Based Costing CLICK HERE. To request a free evaluation of your cost system CLICK HERE.

Budgets are boring. They’re easy to create. Simply take last year’s spending and multiply it by an inflation factor or an across-the-board budget cut percent. Voila, you’ve got a budget.

Easy activities rarely determine an organization’s success. Creating a budget is relatively easy and not mission critical.

Strategy is mission critical. Strategy determines success or failure. Yet leaders spend far less time on strategy than on budgets.

During my 20+ years in consulting, I’ve seen many budgets but few strategic plans.

If you need to excite yourself and your “troops”, there are two steps that must take place before the budget.

Step 1: Strategy
If you’re satisfied with the way things are, then you don’t need a strategy. Just keep do’in what you’ve been do’in.

But if you’re not satisfied with this year’s results, then you’ve got to implement change. What do you change? That’s determined by your strategy.

A strategy is what you intend to do differently to win in the marketplace.

I focus on strategies that fall into one of three categories:

1. Focus on being unique. Define a niche for your existing products or services. Complete the sentence “We are the only organization that _____________.” Author Doug Hall says “If you’re not unique, you’d better be cheap.” Zipcode Honey or Texas Organic Lawncare are examples of niche strategies.

2. Focus on being the best. Provide what your competition does but more efficiently and effectively. If you’re a baker, make sure your cake tastes better than anyone else. If you want to make it unique, fine, but you’ve got to deliver the best quality. Amazon.com and Google are examples of companies whose strategy is to be the best retailer or search engine.

3. Focus on invention. Identify a new customer need and satisfy it with something you invent. Possibly the customer doesn’t even know they have the need. Facebook or Apple are examples of companies whose strategy is to invent social media or smartphones customers didn’t know they wanted.

Step 2: Plan
Define a 1-page plan to implement the new strategy. For an example of a 1-page plan CLICK HERE.

To be successful, a strategy must have a written, doable sequence of activities to achieve a distinct, measurable goal. And to be successful, the plan must be communicated to all employees.

Step 3: Budget
Unfunded plans fail. Create a budget that financially supports implementation of the plan.

A budget is the last step to success, not the first.

It does not require a PhD to predict that technology has and is going to continue to significantly change our corporate and personal life. Peter Diamandis, author of Abundance: the future is better than you think, recently asked readers “What do you believe won’t change over the next two decades?”

One thing that won’t change in the next 20 years is the proven sequence of strategy, plan and then budget.

“People are far more interested in what works than what’s true.”

This quote by Andy Stanley reminds me of my college macro-economics professor.

Professor Hayashi repeatedly said, “In theory, this is how the market is supposed to work.”

My professor taught what was true but failed to tell me what works. He taught sound theory. He drew investment curves and mathematical equations to demonstrate when interest rates drop, borrowing and investment increase.

In theory, that is true. But it did not work following the Great Recession of 2008. Business investments, jobs and GDP did not grow, even with the Federal Reserve offering zero interest to banks.

What works to bring an economy out of recession? Entrepreneurship, a word Prof. Hayashi never mentioned in class or in my textbook.

What’s true can be what works, but it’s frequently not. I’ve learned over the past 60+ years that what works and what’s true are often diametrically different. Here are some examples:

• It’s true that having a high FICO score can make borrowing money easier. What works is spending less than you make to stay out of debt.

• It’s true annual performance reviews can identify an employee’s strengths and weaknesses. What works are daily coaching sessions where your manager simply asks “What are you working on? Do you need any help?”

• It’s true that memorizing answers will get you an “A” on school exams. What works to achieve success in life is learning how to ask great questions.

• It’s true most business text books recommend every business have a detailed strategic plan. What works is a 1-page plan because it’s easier to create, communicate and change.

• It’s true that it’s good to follow your passion. What works is following opportunity. There are 5.8 million opportunities (jobs openings) in America in 2016. Don’t follow your passion, but bring it with you to the opportunities that present themselves.

Andy Stanley’s primary point in making the statement that opened this blog is this: Virtually no one that attends his church is on a truth quest. Instead, they are on a quest for what will work for them to make them happy, at peace and successful.

What truth have you experienced that does not work in your personal or professional life?